The founder of food distributor Cisco, John Bott, was escorted from the building after he retired. He tried to warn the board that their new consultant-driven strategy of centralized procurement was destroying the company's quality-focused ethos, a vision he had built for decades.
The economy is controlled by powerful 'middleman' companies that consumers have never heard of. Food distributor Cisco, for example, has a dominant position supplying nearly all sit-down chain restaurants, shaping food quality and prices across the country from behind the scenes.
Large distributors like Cisco, initially created to help local restaurants, now undermine them by homogenizing their menus. Restaurants lose their specialness when they all source from the same limited, mass-produced catalog, creating a 'Frankenstein's monster' scenario where the aid becomes the threat.
While its attempt to buy a major competitor was blocked, food distributor Cisco achieved market dominance through a "roll-up" strategy. It acquired over 200 smaller, local, and specialty providers, a tactic that often flies under the radar of regulators who focus on large, single M&A deals.
In its failed merger attempt, Cisco argued its market competitors included Sam's Club, a claim regulators rejected. This illustrates that the core of an antitrust case is often not the raw market share number, but the highly debatable and often opaque definition of the market itself, which can be skewed by paid economists.
Food distributors like Cisco may employ a black-box pricing strategy where they sell the main protein—the 'center of the plate'—at or below cost to win a restaurant's business. They then recoup margins by quietly increasing prices on less scrutinized items like napkins, a potential violation of pricing laws.
The number one US sit-down chain, Texas Roadhouse, succeeds by defying the industry trend of using pre-prepared frozen food. Its competitive advantage comes from two key factors: performing scratch cooking in-house (e.g., cutting vegetables) and maximizing table turnover with a high server-to-table ratio.